Table 16-4 In the Following Duopoly Game, the Two Firms Can Either

question 71

Multiple Choice

Table 16-4
In the following duopoly game, the two firms can either set the price of their product high or low. In this market, customers are very price sensitive: when one firm sets a low price it steals the majority of customers from its competitor. The game is represented in the table below.

-Refer to Table 16-4. The dominant strategy for the firms are:

• A) firm A sets low price, firm B sets low price
• B) firm A sets low price, firm B sets high price
• C) firm A sets high price, firm B sets low price
• D) firm A sets high price, firm B sets high price

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Definitions:

Operating Expenses

Costs associated with a company's main operational activities, excluding the cost of goods sold.

Deferred Revenue

Income received by a company for goods or services yet to be delivered or performed, recognized as a liability until performance.

Present Value Interest Factors

A factor used to calculate the present value of a single future payment or a series of future payments, discounted back to the present at a given interest rate.

Guaranteed Residual Value

The estimated value that a leased asset will have at the end of the lease term, as guaranteed by a third party or the lessee.